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General

Key ports

Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is the primary purpose of the ports?

Paraguay is an economy dependent on foreign trade (it is among the five largest soya exporters in the world), and in the past 20 years the major international agri-commodity companies have settled in the heart of South America, developing port terminals that are among the best in the world.

The most important ports in Paraguay are owned and operated by private entities and were developed and constructed within the legal framework of Law No. 419/94 (the Private Port Statute). The port industry has grown steadily in the past decade, mainly because of the significance that agribusiness has for the local economy and the natural need to store commodities before carrying them overseas. The likes of Bunge, Louis Dreyfus and Archer Daniels Midland have built model commodities ports that are concentrated in the city of Villeta, among which stands the port of Complejo Agro Industrial Angostura SA.

The foreign trade conducted by Paraguay has increased by 400 per cent in the last 10 years, leading to greater investment in infrastructure in port terminals. These investments have been made mainly by private capital - approximately US$500 million - to the detriment of public participation, which is demonstrated by the fact that of the 10 port terminals that have the highest revenues, only three are managed by the government.

The most important state-owned terminals are located in the cities of Asunción, Ciudad del Este, Concepción, Pilar and Villeta. Although these public ports have become less competitive in the past decade, this trend may gradually change in the future owing to the current government policy of promoting public ports through private investment (both local and international) within the legal framework of public-private participation (PPP) contracts.

Apart from bulk cargo ports, general cargo and container ports also play a major part in the port industry of Paraguay. Terport, which has announced this year an investment of approximately US$40 million in the construction of a second port in the city of Villeta, is currently the most important port with regard to cargo movement and revenues, followed by Caacupe-mí, Fenix and Seguro. Tosa, a new player in the market, has recently announced the construction of a new multipurpose port in the city of Villa Hayes.

Likewise, the country has dedicated oil ports managed and operated by the main players in the oil market, such as Monte Alegre, Copetrol, Petrosur and the state-owned Petropar.

Reform

Describe any port reform that has been undertaken over the past few decades and the principal port model or models in your jurisdiction.

The Private Port Statute establishes the legal regime for the construction and operation of private ports. It authorises the construction, installation and operation of privately owned river ports in the Paraguayan territory. The Private Port Statute has proven to be the legal instrument under which the majority of private terminals, currently leading the Paraguayan market, have developed.

The Ministry of Public Works and Communications (MOPC) is the authority in charge of the application of and policy compliance with the Private Port Statute, through the Merchant Marine and the Department of Private Ports.

State development policy

Is there an overall state policy for the development of ports in your jurisdiction?

Bearing in mind that Paraguay is a landlocked country, the government aims to plan, in the short, medium and long term, the development of infrastructure, transport services and logistics, with the goal of efficiently satisfying the requirements of the production activity, so as to contribute to social development, the competitiveness of the economy and the access of domestic products to international markets.

Green ports

What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?

There are no compulsory or specific ‘green port’ principles adopted by local regulation. The Private Port Statute requires that each terminal must have an environmental impact statement and a licence granted by the competent body, the Environment Secretariat, in accordance with the provisions of Law No. 294/93. Within this legal framework, each project is evaluated individually according to its characteristics.

Legislative framework and regulation

Development framework

Is there a legislative framework for port development or operations in your jurisdiction?

As previously mentioned, the Private Port Statute regulates the construction and operation of private ports. Decree No. 14.402/01, issued by the executive branch, created the Department of Private Ports as a body of the Direction of Merchant Marine, which is in turn a dependency of the Ministry of Public Works and Communications. The Decree complemented the Private Port Statute and established the regulation for private ports construction and operation.

The current government of Paraguay has adopted a package of legislation to promote the country’s infrastructure and attract foreign investment capital. In 2013, the legislative power issued Law No. 5,102/13 (the PPP Law), creating a legal PPP regime to promote investment in public infrastructure. Among the projects that can be developed within this legal framework, of particular interest are the ports, waterway, dredging and maintenance of the navigability of the rivers projects.

Each contract adopted within the frame of the PPP Law can last up to 30 years. The PPP Law basically conceives a distribution of commitments and risks between the private sector and the government, so that the government does not have to assume full responsibility for carrying out major physical works required by the country.

The MOPC is the government body responsible for the development, selection and execution of the PPP projects in the field of transport and communication channels, including dredging and signalling of rivers and airports.

The decision to promote a project through PPP arrangements requires the approval of the executive branch. The PPP Law allows all kinds of infrastructure and services projects. The MOPC has developed a portfolio of priority projects for the development of the country. These include the waterway, a project to make the Paraguay River navigable 24 hours a day all year long, which is critical to the state’s interests since Paraguay transports 80 per cent of its foreign trade though the waterway.

Decree No. 1,350/14, issued by the executive branch in 2014, regulates the PPP Law.

Regulatory authorities

Is there a regulatory authority for each port or for all ports in your jurisdiction?

In Paraguay, there is a regulatory authority for all public ports, and another regulatory authority for all private ports.

The regulatory authority for state-owned ports is the National Administration of Ports (ANNP), created by Law No. 1,066/65. The Department of Private Ports, created by Decree No. 14,402/01 as a body of the Merchant Marine (in turn a dependency of MOPC), is the authority that polices private ports.

What are the key competences and powers of the port regulatory authority in your jurisdiction?

The ANNP’s competences and powers include, among others, the following:

  • plan, study, design and build new ports, facilities and access;
  • expand and retain existing ports, facilities and equipment to meet the needs of the traffic;
  • exploit all port services;
  • keep the channels, river navigation routes and access to ports in good condition, permitting navigation throughout the year;
  • study, project and build works related to the exploitation of rivers and canals;
  • carry out topographic, geological, hydrological and hydrographic surveys and studies of the rivers and streams of the country;
  • participate in the international coordination of the navigation;
  • acquire, maintain and operate dredging equipment or other equipment necessary for the maintenance of rivers;
  • construct, install and provide the services of dry and floating docks, cranes, docks, dredgers and others;
  • advise the executive branch on all matters related to ANNP’s competence;
  • organise and maintain the service of pilotage, whether for the navigation or movement of ships within ports;
  • supervise the ports operated under concessions; and
  • adopt labour regulations in order to provide effective services.

Regarding private ports, the Department of Private Ports is responsible for enforcing local regulation. It conducts surveys on a regular and ad hoc basis of private ports, monitoring and policing operations. In that sense, the private ports authorised to operate are obliged to submit a monthly report of cargo and vessel movements to the Merchant Marine.

The Private Port Statute also determines that the administration of each port must arbitrate the necessary measures to allow strict compliance with the law, and facilitate the performance of customs, tax, immigration and coast guard authorities so they can run police measures and surveillance. Moreover, each administration is responsible for dredging, markings, signage and other related services in their respective access channels and lakes near its facilities.

Harbourmasters

How is a harbourmaster for a port in your jurisdiction appointed?

In state-owned ports, harbourmasters are appointed by the ANNP, and in private ports they are appointed by the private administration at its sole discretion.

Competition

Are ports in your jurisdiction subject to specific national competition rules?

Yes. Port economic activity, whether conducted by a private or public entity, falls within the scope of local Competition Law No. 4,956/13 and its regulatory Decree No. 1,490/14.

In addition, Decree No. 14,402/01, which regulates the Private Port Statute, stresses that any violation to the rules of competition, or the exercise of monopolistic or unfair competition practices, constitute serious misconduct that authorises the competent authority to apply the most severe sanctions.

Tariffs

Are there regulations in relation to the tariffs that are imposed on ports and terminals users in your jurisdictions and how are tariffs collected?

Law No. 1,066/65 establishes that the board of the ANNP is responsible for projecting the tariffs. The executive branch must then approve the proposed tariffs. They normally include, among others, tariffs, rates, fares and fees for port services, maintenance services, navigability of the rivers and canals, buoys and pilings and other services that are within the competence of the ANNP.

Local regulation establishes that tariffs and rates are determined in such a way that the revenue resulting from its application shall allow the ANNP to cover all of its expenses and to ensure the availability of resources to meet their debts, and to allow the normal expansion of its services.

There is no regulation imposed on private administrations. They fix and adjust the rates according to the market.

Are there restrictions relating to the currency applied to the tariffs or to any fees that are payable by a port operator to the government or port authority? Are any specific currency conditions imposed on port operators more generally?

No. In Paraguay there are no restrictions relating to the currency applied to tariffs or fees.

Public service obligations

Does the state have any public service obligations in relation to port access or services? Can it satisfy these obligations through a contract with a private party?

In public state ports, the primary purpose of the ANNP, as per its organic law, is to maintain the navigability of the rivers at all times, and to keep the channels, river navigation routes and access to ports in good condition, permitting normal navigation throughout the year.

Regarding private ports, the Private Port Statute states that the administration of each port will be in charge of provision and payment of costs for dredging, signalling, marking and other related services in their respective access channels.

Both the state and the private sector can satisfy their obligations in contractual relationships with private parties.

Joint ventures

Can a state entity enter into a joint venture with a port operator for the development or operation of a port in your jurisdiction? Is the state’s stake in the venture subject to any percentage threshold?

Yes. This is currently the situation at the state-owned port of Villeta, currently operated by the Argentinian PTP Group, which entered into a contractual relationship (an operational strategic alliance) with the ANNP. The state’s stake is not subject to any percentage threshold: it is subject to private negotiation and contractual ordinary rules.

Foreign participation

Are there restrictions on foreign participation in port projects?

No. Additionally, the current government has a very strong policy to attract foreign capital for all types of infrastructure projects, including ports.

Public procurement and PPP

Legislation

Is the legislation governing procurement and PPP general or specific?

The legislation is general.

Proposal consideration

May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?

The selection of private participants takes place through transparent and competitive procedures, respecting the principles of nondiscrimination, equality and wide publicity, so as to promote the participation of the largest number of operators, in order to select the private participant who can provide the most efficient and effective service.

The projects executed under the PPP Law are normally subject to formal tender procedures. The PPP Law provides that the selection of participants will be made by formal tender procedures, but also leaves room to establish, through regulation, other sorts of competitive procedures, provided that they are not contrary to the general principles of economy and efficiency, transparency and equality.

The development of PPP projects might start as a result of a public initiative, within the relevant contracting authority, or might be presented to the contracting authority by the private sector. Private initiative projects can be substantiated and evaluated whenever there is not a previous submission made by another private proponent in study, and when the contracting authority is not conducting a similar project for promotion as a public initiative project.

In both scenarios the contracting authority, under the coordination of the PPP Project Unit of the Ministry of Planning, will be responsible for the structure, selection, adjudication and conclusion of the PPP contract. Likewise, the contracting authority has the power to control the proper execution of the contract and the fulfilment of the obligations assumed by private participants.

Joint venture and concession criteria

What criteria are considered when awarding award port concessions and port joint venture agreements?

All PPP projects must have a technical, economic and legal analysis presented and approved by the contracting authority. In addition, the projects should have a favourable opinion issued by the Ministry of Planning, and the approval of the Ministry of Finance.

The regulation of the PPP Law (Decree No. 1,350/14) establishes the scope, form and content of the previous assessments required that may be applicable in each case, such as:

  • engineering;
  • operational;
  • commercial;
  • economic;
  • financial;
  • legal;
  • environmental; and
  • economic.

The award of the PPP project to a certain private participant is decided in accordance with the evaluation system, which consists of a predetermined scoring system established in the specifications of the tender.

The evaluation system must meet one or more of the following factors:

  • fees paid by users;
  • remuneration for services rendered to the state;
  • the term of the contract;
  • government contributions to the bidder to supplement revenues coming from users;
  • payments offered by the bidder to the contracting authority;
  • income guaranteed by the government;
  • the total or partial score obtained in the technical qualification;
  • qualification of additional useful and necessary services;
  • total contract revenues, calculated in accordance with the provisions of the tender; and
  • other objective factors defined in the regulations.

Model agreement

Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?

There is no model PPP agreement. The legal terms of the project are included in contracts negotiated between the private participant and the contracting authority.

Approval

What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?

A decree issued by the executive branch is required to start a PPP project. Below is a brief description of the process.

The project, whether generated by public or a private initiative, needs to be submitted to the PPP Project Unit of the Ministry of Planning, the technical body of the executive branch in charge of developing PPP projects. The evaluation process starts there, where the projects are submitted at a pre-feasibility level.

As previously mentioned, the PPP Law and its regulatory decree establish that before the execution of PPP projects, different sorts of studies are submitted, such as technical, economic and legal. The assessments and favourable opinion of three different governmental bodies (the Ministry of Planning, the Ministry of Finance and the contracting authority) are compulsory.

The evaluation process involves analysis in stages. The first evaluation is given to the proposal submitted at a pre-feasibility level. Then the process advances to the feasibility level, and if there are favourable assessments the project is raised to the executive power. With the approval of the executive power, the project proceeds to the stage of preparation of the terms and conditions of the tender and the basis for a competitive procedure. All the initiatives, whether public or private, must pass through the described evaluation process.

Upon completion of the assessment process and once the terms and conditions for bidding are approved, the process goes through the stage of submitting the bids from the private sector, which lasts at least 60 days. After this period, the bids are evaluated and then the contracts are awarded and signed.

Projects

On what basis are port projects in your jurisdiction typically implemented?

The vast majority of ports in Paraguay are based on fully privatised port models.

Term length

Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?

There is no minimum term. The maximum term for a PPP project, including its extensions, is 30 years.

On what basis can the term be extended?

The term can be extended up to 10 years, under exceptional circumstances only, for unforeseeable and extraordinary acts after the signing of the PPP contract, provided that those acts provoke serious economic damage to the private participant and substantially alter the financial balance of the PPP contract. Article 34 of the PPP Law provides the casuistic details.

Fee structure

What fee structures are used in your jurisdiction? Are they subject to indexation?

The position of the private participant will be determined in each contract according to the type and characteristics of the proposed PPP agreement. Different forms of remuneration may be provided, such as granting the right to charge fees to users, public contributions or other sources of income.

A public contribution may include, among others:

  • proceeds from public revenue;
  • project financing guarantees;
  • guarantees of minimum income collection;
  • tax exemptions provided for in the laws;
  • contributions to the capitalisation of special purpose corporations; and
  • loans.

Exclusivity

Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?

The government is empowered to grant exclusivity to the private operators.

Regarding guarantees, the PPP Law establishes the creation of a trust fund in order to effectively and efficiently meet the firm and contingent commitments assumed by the state under a PPP contract.

The trust is financially administered by the Financial Development Agency in a separate estate, pursuant to the provisions under Law No. 921/96 and its regulations. The state, acting as trustee, acts through the Ministry of Finance. Resources transferred to the fund are not returned to the Treasury, and remain within the affected fund until its conclusion.

The effectiveness and efficiency of the payment of state commitments is assured in that way.

Other incentives

Does the government or the port authority provide any other incentives to investors in ports?

Investors in Paraguay can benefit from the incentives provided under Law No. 5,542/15 and Law No. 60/90. These establish an incentive scheme for taxes and provide guarantees to promote investment of national and foreign capital.

The purpose of the regulation is the protection of capital investment in the creation of industries or other productive activities settled in Paraguay, when they contribute to the generation of employment and economic and social development.

These are general and non-specific regulations related to ports, and are not related to greenfield or brownfield investments. There is no specific investment threshold required to qualify. The projects are studied and approved by an investment council within the structure of the Ministry of Industry and Commerce.

Port development and construction

Approval

What government approvals are required for a port operator to commence construction at the relevant port? How long does it typically take to obtain approvals?

To obtain the construction permit for a private port, commercial companies registered in Paraguay must submit an application to the Merchant Marine, specifying the role and characteristics of the port they seek to exploit and operate. Decree No. 14,402/01 establishes the requisites that the applicant needs to submit to the Merchant Marine.

The applications, once they have the favourable opinion of the Merchant Marine, are raised to the MOPC, which studies the application together with the Council for Economic Development and Finance. Lastly, the MOPC elevates the application for the approval of the executive branch, which authorises the construction of the private port though a decree.

The entire process can last up to two months.

Port construction

Does the government or relevant port authority typically undertake any part of the port construction?

The government does not take part in private port constructions, which are conducted entirely by the operators on a private basis. The Merchant Marine and the coast guard have supervisory functions over the works, especially when they pose any sort of risk to navigation.

Does the port operator have to adhere to any specific construction standards, and may it engage any contractor it wishes?

Private operators do not have to adhere to any specific construction standards. Each investor designs and constructs the terminals in accordance to its preferences, and elects the constructor of its choice with absolute freedom. Normally, construction processes are carried out by private tenders.

What remedies are available for delays and defects in the construction of the port?

This is a matter entirely governed by private contractual law. In that sense, the remedies available to the owner with regard to the builder will be those conceived in the construction contract and the Paraguayan Civil Code. They can typically be any of the following: specific compliance, compensation for damages, liquidated penalties, termination of the contract, etc.

Port operations

Approval

What government approvals are required in your jurisdiction for a port operator to commence operations following construction? How long does it typically take to obtain approvals?

There are two different licences enabling private ports to operate:

  • a temporary licence: this authorisation is granted by a decree of the executive branch for a period of five years; and
  • a permanent licence: this is the final authorisation granted by a decree of the executive branch when a private port has been authorised to operate continuously for a period of 10 years.

Temporary licences may be suspended or terminated by the competent authorities for breach of specific circumstances detailed in Decree No. 14,402/01.

The application process can last up to two months.

Typical services

What services does a port operator and what services does the port authority typically provide in your jurisdiction? Do the port authorities typically charge the port operator for any services?

In private ports, the operator provides and charges for all sorts of services for importers, exporters, ship owners and shipping lines.

For importers and exporters, these services would include, among others:

  • container storage;
  • storage and stock control of general cargo in a customs warehouse;
  • storage and stock control of general cargo in a temporary storage warehouse;
  • unstuffing;
  • customs inspection;
  • coordination of import deliveries;
  • electricity supply for refrigerated cargo;
  • monitoring of the cold chain;
  • multimodal transportation of containers across the country; and
  • special services for cargo, packaging, labelling, car and truck storage, and care.

For ship owners, the services would typically consist of:

  • stevedoring of containers and general cargo;
  • quay assistance;
  • potable water supply;
  • electricity supply;
  • general supply services; and
  • mooring area.

For shipping lines, the port would normally provide:

  • stowage of containers and general cargo;
  • container storage;
  • container inspection;
  • stock information; and
  • sealing and reporting.

For special cargo, the ports would normally provide:

  • stowage of cargo;
  • crane services;
  • container transport; and
  • transport of heavy and oversized cargo.

Access to hinterland

Does the government or relevant port authority typically give any commitments in relation to access to the hinterland? To what extent does it require the operator to finance development of access routes or interconnections?

The government would typically cooperate in providing access to the terminal by road. The operator is not compelled or bound to finance public infrastructure outside the port perimeter, but nothing prevents the owner from proposing that the local municipality sign agreements in order to finance roads.

Suspension

How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a port authority require the operator to suspend them?

See question 34.

Port access and control

In what circumstances may the port authorities in your jurisdiction access the port area or take over port operations?

Owners must operate their ports in accordance with the Private Port Statute and its regulatory Decree (No. 14,402/01).

The Merchant Marine conducts regular and ad hoc audits throughout the year to monitor compliance with local regulation. If this competent authority acknowledges the existence of irregularities, or any breach or violation of the rules governing the licensing and operation of private ports, the Merchant Marine would instruct the port to comply with regulations or rectify the irregularity.

If, within 10 days of receipt of the instruction, the private port does not respond, the Merchant Marine will proceed to apply a preventive suspension of the activities of the terminal. The preventive suspension of port activities can be extended for a period of 10 to 90 days, in accordance with the gravity of the irregularities. The suspension would normally last until such irregularities are remedied or rectified by the port.

Cancellation of the licence is the most severe sanction. It is conducted by the Merchant Marine using a summary process. A report detailing and stating the irregularities is then raised to the MOPC, which finally takes the decision of cancelling or not cancelling the licence.

All administrative measures and decisions taken by the Merchant Marine regarding the suspension or cancellation of licences can first be appealed to the MOPC and then to ordinary justice in the administrative jurisdiction.

Decree No. 14,402/01 considers the following conduct as serious offences:

  • breach of the conditions that were taken into account to grant the licence;
  • operation of the port outside the scope of the activities authorised and granted by the respective licence;
  • failure to satisfy, provide and secure within the port area the safety of navigation, port security, health measures, environmental protection, customs and immigration controls;
  • violation of the rules of free competition, such as exercising monopolistic or unfair practices; and
  • in general, breach of the provision of Law No. 419/94 and the Decree No. 14,402/01.

Recidivism of any of the above offences by the operator might constitute sufficient ground for application of the penalty of cancellation of the licence.

Failure to operate and maintain

What remedies are available to the port authority or government against a port operator that fails to operate and maintain the port as agreed?

As described, the first remedy would be the provisory suspension of the licence and the activities by the Merchant Marine, followed by the cancellation of the licence by the MOPC.

Transferrable assets

What assets must port operators transfer to the relevant port authority on termination of a concession? Must port authorities pay any compensation for transferred assets?

In the development of PPP projects, the private participant may use different types of goods, namely:

  • Real property of the contracting authority or other public entities, existing or to be created or supplied during the contract term, which the contracting authority gives the private participant the right to use. In such cases the private participant is obliged to return these goods to the administration at the termination of the contract.
  • Property owned by the private participant, existing at the time of signing the PPP contract, or to be created or provided during the contract term. The property owned by the private participant might be transferred to the contracting administration or removed from the project area at the end of the term, depending on the specific terms of the PPP contract.

Miscellaneous

Special purpose vehicles

Is a port operator that is to construct or operate a port in your jurisdiction permitted (or required) to do so via a special purpose vehicle (SPV)? Must it be incorporated in your jurisdiction?

A port operator has the possibility - but not the obligation - to construct or operate a port via an SPV. The Private Port Statute establishes that the MOPC will grant authorisation for the construction and operation of private ports to commercial companies registered in the Republic of Paraguay.

Likewise, if the port is constructed within the legal framework of a PPP project, the PPP Law states that the bidder awarded with a project is obliged to constitute, within the period specified in the bidding terms and conditions, a corporation in Paraguay, of which the awarded bidder shall be the majority shareholder.

This corporation shall be incorporated only for the purposes determined in the bidding terms and conditions. It will last for at least the duration of the contract term plus two years.

Transferring ownership interests

Are ownership interests in the port operator freely transferable?

The Private Port Statute does not pose any sort of interference. The change of ownership in the port must be communicated to the Merchant Marine.

Regarding ports constructed and operated under the PPP Law, the majority shareholder must remain as the successful bidder. In the case of successful bidders that were awarded in consortiums, the company shall remain constituted with the same partners, shareholders or members of the consortium, and in the same proportions they had when the award took place. The contracting authority shall approve any modification of these shares, without affecting the commitment of the bidders, which can influence the technical and financial capacity of the consortium.

Granting security

Can the port operator grant security over its rights under the PPP agreement to its project financing banks? Does a port authority in your jurisdiction typically agree to enter into direct agreements with the project financing banks and, if so, what are the key terms?

The PPP Law states that private participants may finance the development of PPP projects, through the modalities, instruments and financial transactions recognised and regularly used in national or international financial markets. For the benefit of its creditors and to ensure obligations directly related to the development of the corresponding PPP contract, private participants may constitute a special guarantee consisting of a pledge or creation of collateral trust in respect of rights arising from the PPP contracts, including future cash flows generated by the project, and the shares of capital stock of the corporation.

Agreement variation and termination

In what circumstances may agreements to construct or operate a port facility be varied or terminated?

The contracting authority may unilaterally change the PPP contract on grounds of public interest, which must be duly supported by expert advice. The changes made to the contract under this prerogative should be appropriate and proportionate to the causes that motivate them, but must respect the nature of the contract and the contractually agreed economic and technical conditions.

In such cases, the contracting authority is obliged to rebalance the economic and financial equation of the PPP contract, and has an obligation to fully compensate the private participant for any damages that the alteration may cause to the economic equation of the PPP contract.

The regulatory decree establishes the maximum amount of investment that the private participant may be required to make by any variation of the PPP contract, and the maximum period within which the contracting authority may order the modification of the project.

The contracting authority and the private participant may also mutually agree to modify the characteristics of the works and services contracted, in order to increase levels of service and the technical standards set out in the tender, by signing the corresponding supplementary agreement. The addendum signed by the parties shall respect the nature of the contract and the economic and technical conditions originally agreed.

Contractual breach

What remedies are available to a government or port authority for contractual breach by a port operator?

The PPP Law regulates two important remedies: the suspension and the termination of the contract.

The contracting authority may reasonably suspend the contract under:

  • fortuitous or force majeure events duly verified in accordance with the terms of the contract; or
  • for any other reason established in the PPP contract.

Following the suspension of the contract, the private participant shall have an extension of the term of the contract equal to the period of suspension. Additionally, if it is stipulated in the contract, the private participant might be entitled to claim any compensation.

The suspension shall not exceed a period of 60 days.

As regards the contractual remedy of termination, local law provides that the PPP contract would be terminated for the following reasons:

  • the end of the term of the contract or its extensions;
  • unilaterally, for a material breach of the private participant or of the contracting authority, in accordance with the provisions of the PPP contract. The breach entitling to termination must be established by final resolution issued in accordance with the system of dispute resolution provided in the contract;
  • redemption provisions of the contracting authority for reasons of public interest, without prejudice to the compensation due to the private participant in accordance with the terms of the contract, the law and the regulation;
  • owing to the impossibility of the private participant of fulfilling the contract as a result of measures taken by the government;
  • if the private participant initiates bankruptcy or insolvency proceedings;
  • on the occurrence of any event that prevents the private participant from complying with the contract;
  • by mutual agreement between the contracting authority and the private participant; and
  • in other cases expressly provided for in the contract.

Governing law

Must all port PPP agreements be governed by the laws of your jurisdiction?

Yes.

Disputes

How are disputes between the government or port authority and the port operator customarily settled?

Disputes on PPP contracts must be solved, if not by direct negotiations, then by arbitration processes. The procedures are established in each specific contract. Disputes of a technical nature can be solved in a technical panel formed by experts.